PepsiCo Names Chairman of Spinoff

PepsiCo Inc. on Monday named its 72-year-old former president to the top management job of the $10-billion fast-food restaurant company that it will spin off later this year.

Andrall Pearson, a partner at the New York leveraged buyout company Clayton, Dubilier & Rice and president of PepsiCo from 1971 through 1984, will be chairman and chief executive of the restaurant spinoff, Pepsi said.

He will be joined by 44-year-old David Novak, currently president and chief executive of Pizza Hut and Kentucky Fried Chicken, which, along with Taco Bell, are being spun into the largest restaurant company in terms of stores in the world. Novak will be vice chairman and president.

Pearson’s appointment took Wall Street by surprise.

“I’d never heard Pearson’s name thrown around as a potential candidate,” said Emanuel Goldman, an analyst at PaineWebber Inc. “But it’s very apropos to have him in that position, since he was instrumental in Pepsi getting into the restaurant business in the first place.”

Pearson engineered Pepsi’s purchase of Pizza Hut in 1974 and then of Taco Bell nine months later. The deals were Pepsi’s first forays into the restaurant business.

Known as a tough-minded leader who set exacting standards for his managers, Pearson left Pepsi at the end of 1984 to become a professor at Harvard’s business school. He left Harvard to join Clayton, Dubilier & Rice in 1994.

“This is a unique and very appealing opportunity,” Pearson told Reuters. “I wanted the challenge of working with David [Novak] to help this company take its place as a great restaurant company.”

While analysts generally applauded Pepsi’s decision to hire the experienced Pearson, some said he would simply be a figurehead for Novak, who will oversee the restaurants’ day-to-day operations and basically run the company.

“David Novak is going to run the show, in my opinion,” said Michael Rietbrock, an analyst at Smith Barney.

Pearson disagreed, saying, “I didn’t become head of this thing to become a figurehead. Both David and I will take an active role in leading the company.”

Pearson declined to cite his salary but said it would be “well into the seven figures.”

Pepsi’s shares rose 25 cents to close at $37.375 on the New York Stock Exchange.